The Tennessee Valley Authority, which once occupied a half dozen downtown buildings in Chattanooga, has consolidated its reduced staff in its own Chattanooga Office Complex and has quit leasing or has sold off all of its other downtown properties.
For the third time in the past two years, TVA on Thursday sold one of its downtown buildings due to the reduced demand for office space by America's biggest government-owned utility.
Dillard Development Co. purchased the former Tennessee American Water Co. headquarters building in downtown Chattanooga Thursday for $1,325,000. Dillard emerged as the highest bidder for the 17,672-square-foot building among four bidders at public auction Thursday.
Ryan Dillard, a partner in the Dayton, Tenn., construction and development company founded by his father, said the new owners plan to spruce up the empty building and find new tenants to fill it up.
"It's a great building in a great location with its own parking," Dillard said after winning the auction to buy the site Thursday. "We don't have specific plans currently, but we're excited about purchasing it."
TVA bought the former headquarters of the Tennessee American Water Co., in February 2008 prior to the recession for more than $2 million, according to those involved in the deal at the time.
Greg Hadden, a real estate manager for TVA, said the utility bought the two-story office building when it was going to develop a mail and inventory processing center to serve its power headquarters. But those plans were scrapped and TVA never used the structure.
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TVA sells surplus offices in downtown ChattanoogaShrinking utility consolidates in power headquarters
Tennessee American Water occupied the building from 1978 to 2012 under a lease with Luken Holdings prior to the building being sold to TVA. The building is next door to the utility's 1.4 million-square-foot Chattanooga Office Complex.
"We can now accommodate all of our Chattanooga staff within the Chattanooga Office Complex," Hadden said.
Over the past three years, TVA has cut more than 2,000 jobs from its employment rolls as part of its effort to trim $500 million from annual operating expenses.
TVA sold another one of its buildings a block away at Market and 11th Streets - the 10-story Edney Building - for $1.3 million in May to make way for the hub of the new downtown Innovation District. Two years ago, TVA sold its former fleet maintenance and storage facility on 10th Street to make way for the Douglas Street apartment complex now under construction.
TVA also is disposing of about 1,000 acres at its Muscle Shoals reservation in Alabama, Hadden said.
"We no longer need as much space and land as we once did so we're reducing our footprint," he said.
TVA was once one of Chattanooga's biggest tenants downtown with leased space in the Haney building, Chestnut Tower, Warehouse Row, Edney Building and portions of other structures.
"This shows both the changes at TVA and the changes in office use with technology now making it more critical to consolidate some operations but also easier to allow some folks to work at home or work with less space than in the past," said David DeVaney, president of NAI Charter Real Estate Corp. "We're seeing a transformation in a lot downtown space now in Chattanooga."
As companies have downsized or shifted more work to telecommuters, office demand in Chattanooga has remained stagnant and rents have been largely flat for the past decade or more, DeVaney said. Offices such as the former BlueCross and BlueShield headquarters, often known as the Gold Bulding, and the former Chattanooga Bank Building along Eighth Street are being converted to hotels. The historic Maclellan building and former Ross' Hotel downtown are both being converted to apartments.
"Downtown is changing, but with the city's new Innovation District and many more people living downtown, it's still a relatively vibrant central city market in Chattanooga," DeVaney said.
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.